This story was written by Keith Dawson for UBM DeusM’s community Web site Business Agility, sponsored by IBM. It is archived here for informational purposes only because the Business Agility site is no more. This material is Copyright 2012 by UBM DeusM.

Merger of United & Continental Shows How Not to be Agile

When United cut over to Continental's reservation system, their lack of agility came home to roost.

Last weekend United Airlines switched over to using the reservation system of the acquired Continental. It did not go well. United's rigidity, cost-cutting, and lack of customer orientation are to blame.

Beginning early on Saturday, after IT workers had thrown the switch to cut over to Continental's reservation system, problems cropped up especially among frequent flyers who had booked upgrades. They were told variants of "Your reservation requires special handling, please check in at an airport kiosk or see a United agent." The problem was, many kiosks were malfunctioning and lines to talk to agents quickly backed up. The phone offered no relief: even United's most elite flyers, calling their exclusive number, reported waits of up to an hour. More ordinary flyers could wait on hold for 3 hours or more.

The on-time statistics at airports across the country told the tale. At former United hubs, on-time stats started the day near 60 percent and began falling. At former Continental hubs, the stats began at 70 percent and rose throughout Saturday. Employees of the pre-merger United were struggling with Continental's reservation system, despite what United tried throughout the weekend to spin as ample pre-cutover training. It clearly was not ample; it was not even adequate.

Over the weekend United put out press releases touting their on-time performance numbers, and the uncritical press mostly bought the rosy story. But Portfolio Magazine (see the link above) noticed that United was defining "on time" as within 30 minutes of scheduled arrival or departure. The government had standardized decades ago on a 15-minute window. By the official criterion, United's on-time performance crumbled over the weekend, reaching a low of 26 percent for departures at O'Hare Airport and 29 percent at Dulles.

When United and Continental announced their intention to merge in May 2010, Continental's popularity with the flying public had been high for 15 years. In 1994 the company's reputation was in the basement, a result of Frank Lorenzo's disastrous leadership. Continental had been through Chapter 11 bankruptcy twice in the preceding 10 years, and was dead last in the estimation of travelers. Gordon Bethune took over as CEO and brought the company back from its near-death experience, as described in his 1999 book From Worst to First. He first had to transform the corporate culture into one focused on satisfying customers. Bethune was a proponent of the value of data in improving a company; one of the chapters in his book is titled "What gets measured gets managed."

Bethune's successor Larry Kellner hewed to the same customer-first policies in the 2000s. Even in the airline downturn following the 9/11 attacks, flyers viewed Continental as the the customer's airline. Kellner resigned just before the merger was announced, and word later emerged that he had opposed it.

The 18 months post-merger have changed the picture for Continental. The latest Temkin Experience Ratings show that Continental had dropped from near 70 (the Good range) down to 57 (Poor), where it keeps company with United near the bottom.

Employees and frequent flyers tell of insistent cutbacks since the merger in everything that made the flying experience tolerable. Frequent flyer Ray Wang sums up the emotion of long-time Continental loyalists: "Just give us our airline back." Wang offers five tips to United that could enable a return to first-rate customer experience: revisit listening to your customers, understand that everything is public, stop resting on your laurels, listen to your employees, and build an active community.

Sounds like excellent advice that could make any agile company fly higher.